EXPERT OPINION: A two-year pandemic, uneven economy, Ukraine war — and cotton prices decline?

On 11 March 2020, the World Health Organization declared Covid-19 a pandemic. So, as we take stock of the second ignominious "official" anniversary of the pandemic, the world is coping with a level of stress not endured for decades. Indeed, we've all seen this slow-motion train wreck up close as the economy struggled to regain its balance. Which is no wonder: The world has had to contend with rolling lockdowns, knotted supply chains, supply and demand imbalances, and rising inflation, while new variants of the Covid virus continue to infect global populations. The world is exhausted from contending with the pandemic. Our industry, along with dozens of others, awoke about two years ago to find their elaborate supply models failed to work. What seemed so easy — moving goods from point A to Point B — devolved into a struggle of the fittest, a brawl where the supplier-customer model of globalised production came to an abrupt and painfully crashing halt. Piling on the pain And if that wasn't enough, we now have the first major land war in Europe since World War II, as Russia attacked Ukraine - caused by a madman determined to exploit these mad times, the petty dictator, Vladimir Putin. So, perhaps out of necessity, vanity, or both, Putin embarked on a conflict to invade the neighbouring country of Ukraine. Putin's likely intention is a deplorable attempt to escape what may be unavoidable for him: that his rule may end abruptly, something he desperately wants to avoid. So, he took a page out of the petty dictator playbook entitled "Deflecting an Unhappy People's Attention" and issued a tissue of lies and deception as justification for attacking Ukraine. But he miscalculated, plain and simple: He wanted a swift, decisive victory over the Ukrainians or a Ukrainian overthrow of their elected government. Neither has happened. Indeed, the longer Ukrainians hold out, the worse it will get for Putin. The action has galvanised the West - injecting new life into countries worn down by the pandemic and political division, the exact opposite of what he expected. In short, I guess he watched too much cable news and seldom exited his self-imposed isolation to experience the real world. I wonder what makes him so insecure? The effect of war and dictatorships It is incredible how war can overshadow other human endeavours and cause swift and unexpected change. For instance, we now have a unified West - the last thing Putin ever wanted - along with a resolve to instil a new level of international cooperation. He thought he could drive a wedge in NATO; instead, he ironically breathed life into the Western alliance. There is an odd thing about dictatorships: They look stable until they aren't. And when they do collapse, often quickly and with little notice, they leave chaos in their wake. A power vacuum forms. The military or political opportunist steps in and picks up all the pieces in a country of dramatically diminished status and internal dissent. Failure in Ukraine will spell the end of Vladimir Putin. Sure, he may try some last-ditch effort to remain in power, like following through on his thinly veiled reference using nukes, but let's hope calmer heads in the Russian military would block that. So, what about cotton prices and the apparel industry? History suggests that prices rise during times of great societal stress, especially in commodities. Today is no exception, as oil and natural gas prices, for instance, are up sharply, along with prices for many agricultural and intermediate products (yarn, for example). Moreover, inflation was already building in pandemic-ravaged supply chains at the outbreak of hostilities in Ukraine, as consumers complained of higher prices for many products. At the same time, stock markets tanked out of fear of the twin unknowns of a pandemic and a major war. And that's the key takeaway here: Wars and pandemics create uncertainties, literal unknowns that are impossible to predict or forecast. The world is suddenly taking a crash course in risk management. Intellectual pillars of the old world have collapsed and left in the rubble — traditional economic models. The world has no choice but to rethink old assumptions and build anew. Dear reader, you may have thought this column had little to do with textiles and apparel. But let me assure you that that's not the case. Throughout the Russian-Ukrainian crisis, little-noticed except by the keenest of observers in the cotton trade, cotton prices have declined, and the decline may be accelerating. But what about all that inflation I droned on about earlier? Flawed analysis and flaky deductions on my part? Nah, look at cotton futures markets, and you'll see what I mean. Cotton prices soared during the pandemic and ensuing supply chain crisis. They topped out at about US$1.35 per pound, but cotton prices have declined since the outbreak of hostilities in Ukraine. May futures are below $1.20 per pound and falling. Check the ICE exchange prices. So why is this? A stronger dollar, for one thing, and a larger anticipated US crop for the 2023 season, for another. But there's another reason that hits closer to home: Weakening downstream demand. Historically, during times of fear and pandemic, consumers spend money on necessities. It's easy to put off buying that next pair of jeans when's there's a run on everything from toilet paper to food products to fuel. Cotton is a fickle commodity. It often moves in a direction opposite of expectations. Weather can affect its price, but so can disruptions in supply chains and demand at the stores for cotton-rich products. What are the implications for apparel? We had a surge in consumer clothing purchases late last year, and pent-up demand skewed sales figures to record levels for many products. But now, we have a war, shaky stock markets and our closets are full. Will consumers continue to buy as they did at Christmas? Probably not. It seems reasonable to expect consumer expenditures on clothing to return to historical averages, which will appear like declines when it's a return to historical trends. Inflation has also affected retail sales - and that will only further dampen demand. Consider this: Is clothing essential? Sort of - we do need some basics for survival. But is fashion essential? Sorry gang, it's not, especially when the threat of war takes hold. Fashion gets kicked to the curb, along with all those industry sustainability initiatives, marketing programmes, and spurious consumption. When it comes to selecting the best online casino NZ, there are many factors to consider. 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A war, well, there are unforeseen effects on the market. Spindle in some inflation as we may be looking at slower retail demand - at least as compared to the previous holiday season. In this sense, weaker cotton prices may be an early indicator of slowing demand for apparel - again, not an absolute decline but rather a return to historical averages. But you may ask: What about synthetic fibres? And you'd be right to ask. Here's my answer, we may be in one of the odd times when cotton prices are falling while prices for synthetics are rising, or at least being squeezed, by higher petrochemical costs. It's kind of hard to imagine - polyester prices rise while cotton falls. How will the fibre companies cope with that, especially if apparel consumption flatlines? We live in crazy times. Just Style is keeping you up to date with all the latest developments of the Ukraine-Russia war and its potential impact on the apparel industry via a Special Focus. Click here to access our TIMELINE – Ukraine-Russia crisis: The impact on the global apparel industry and here to see how fashion firms are mobilising to support Ukraine.